Malta: 2022 Article IV Consultation-Press Release; and Staff Report

The 2022 Article IV Consultation with Malta explores that Malta’s economy has recovered strongly following the worst recession in decades due to the coronavirus disease 2019 pandemic. Malta’s economic recovery from the pandemic is remarkable, but the indirect impact of Russia’s war in Ukraine weighs on the outlook. The strong economic recovery continued into 2022, driven by high net exports and consumption. Gross domestic product growth is, however, set to slow in 2023 as the confluence of global shocks weighs on the economy. Inflation is expected to gradually decline but remain elevated. Risks to the outlook are tilted to the downside, mainly because the growth slowdown in Europe could be deeper than expected. The financial system remains sound, but emerging risks warrant continued vigilance and close monitoring of banks. The authorities should closely monitor banks’ risk management to ensure that provisions are continuously updated as economic prospects change. Structural reforms are necessary to improve Malta’s long-term growth and address climate challenges. On climate change policy, concerted efforts involving all stakeholders should continue to implement the 2021 Low Carbon Development Strategy and seek decarbonization potential by exploiting various sources, including investing in renewable sources.